• Time-saving: 

  Using an EMI calculator can significantly save time because of their easy to use interface.

• Accuracy and Reliability: 

  The results given by the calculator are reliable and accurate as they are formula driven.

• Quick decision-making 

  EMI calculator enables you to compare EMIs of loans from different banks, which aids in quick decision making.

An EMI calculator is a financial tool which uses advanced financial calculations to give you the EMI amount of the loan. Let's understand what components one needs to calculate the EMIs using Pocketful’s online EMI calculator. There are three main components that you need:

1. Principal amount (P): 

   The principal amount is the sum of the money the lender gives to the borrower, generally against some collateral or security. If in future, the borrower fails to make the payments, the lender has complete rights to acquire the ownership of the asset that was given as collateral.

2. Interest rate(R): 

   In simple words, interest is the cost of borrowing the money, or you can also term it as the reward for bearing the risk by the lender. An interest rate is the amount of money due per period as the proportion of the amount borrowed or deposited.

3. Loan tenure(N): 

   Loan tenure is the period between the dispersal of the loan amount to the closing of the loan or the complete repayment of the principal amount along with the interest payment.

   The longer the tenure, the smaller the monthly EMI & the shorter the loan tenure, the larger the amount of the monthly EMI. Thus, the loan tenure and the amount of the EMI have an inverse relationship.

There’s a standard formula used by every EMI calculator online:

E= (P*R*(1+R)^N)/ (( 1+R)^(N-1))

Let's first understand what is a credit score, its importance, and how to build a good credit score.

Credit score

A Credit score or Credit rating is an indicator of a person’s creditworthiness, in simple words, the ability to pay the debt.

It is usually expressed as a number based on the person’s repayment history and credit files across different loans and credit institutions. The range of a credit score is generally between 300 and 900. It’s not a simple number; it can signify your past financial behaviour. The higher the credit score, the better your perceived ability to pay the debt by Credit Institutions.

If you’re looking for a home loan, car loan or applying for a credit card, basically any kind of debt, your credit score will significantly impact the chances of approval, interest rate, repayment terms, credit limit, etc.

In India, Credit scores are issued by Credit Information Companies (CICs), also known as Credit Information Bureaus (CIBs). CIBs are different from Credit Rating Agencies (CRAs). CIBs provide credit data of borrowers and are licensed by the Reserve Bank of India (RBI), whereas CRAs evaluate the credit quality of debt instruments offered by companies, government, and other institutions. CRAs are regulated by the Securities and Exchange Board of India (SEBI).

When taking a loan or applying for a new credit card, Banks and lending institutions use credit scores to assess whether you are worthy of credit. The better your credit score, the higher the chances of getting your loan approved or vice versa.

Further, you are likely to get additional benefits if you maintain a healthy credit score, such as low interest rates, better repayment terms, higher credit limits, etc.

1. Non-Payment of EMI:  

   It is the most important factor which can significantly impact your credit score. Whether it is a payment of your credit card bill or an EMI of your home loan, never miss the due date.

   Tips to improve:

   
   

   
   

   Always pay on time: Never forget to pay your EMIs or better enable auto pay on your loan instalments.

2. Credit Utilization:  

   Over-utilisation of the limit offered to you can signify that you are credit-hungry. It is calculated based on your overall credit limit.

   Tips to improve:

   
   

   
   

   Always pay on time: Never forget to pay your EMIs or better enable auto pay on your loan instalments.

3. Closure:  

   Closing your active credit cards and loans can temporarily affect your credit score as it reduces your credit history. The older the card or loan, the higher the impact on your credit score.

   Tips to improve:

   
   

   
   

   Always pay on time: Never forget to pay your EMIs or better enable auto pay on your loan instalments.

4. New Credit: 

   Taking more credit in the form of credit cards or loans signifies that you are credit hungry, and it can have a negative impact on your credit score.

   Tips to improve:

   
   

   
   

   Always pay on time: Never forget to pay your EMIs or better enable auto pay on your loan instalments.

5. Others:  

   There are a few other factors that can impact your credit score. Although, the impact of these factors is less as compared to other factors. These are:

1. New Inquiries:  

   If you apply for a new loan or credit card, the lending institution will assess your credit score first, which means it will go to the CICs and make an inquiry. The higher the inquiries, the higher the impact on your credit score. However, the impact is temporary.

2. Incorrect address:  

   If address or any personal details are not consistent across your loans or credit cards, then it can impact your credit score.

   Tips to improve:

   
   

   
   

   Always pay on time: Never forget to pay your EMIs or better enable auto pay on your loan instalments.